The First American Corporation today reported its earnings for the third quarter, and said that profits swooned 48 percent amid an extended downturn in the U.S. housing market. Net income was $46.6 million in the third quarter of 2007, compared with net income of $90.4 million in the third quarter of 2006. From the press statement:

“Sharp declines in mortgage originations created a challenging operating environment during the quarter,” stated Parker S. Kennedy, chairman and chief executive officer of The First American Corporation. “The Title Insurance segment cut costs aggressively and our managers will seek additional cost savings as we continue our focus on the goal of maximizing the pretax margins in our Title Insurance segment.”

Interestingly, in the press statement Kennedy also singled out the company’s “default-related businesses” as an area of “favorable” financial performance — interesting because this is rarely ever the segment called out at the corporate level as a positive contributor to earnings. The reason is simple: nobody wants to be on record saying they’re making money off of kicking people out of their homes, although First American certainly is far from the only company seeing a surge in default-related revenue right now. Taking a look around First American’s title business during the third quarter:

• During the third quarter of 2007, operating revenues in the Title Insurance segment declined 9 percent to $1.4 billion from $1.5 billion in the same quarter of 2006.
• Average revenue per direct title order increased to $1,737, or 7 percent, relative to the third quarter of 2006.
• Direct operations closed 415,000 title orders for the third quarter of 2007, a decrease of 12 percent when compared with 473,300 title orders closed in the third quarter of 2006.
• Loss provisions for title claims during the quarter equalled 6.4 percent of operating revenues, versus 5.5 percent in the third quarter of 2006, due to higher expected ultimate losses for policy year 2007.

A bright spot was the company’s Mortgage Information segment — a segment that includes its aforementioned default-related services — which saw revenues increase 5 percent to $28.5 million, from $27.2 million in the third quarter of 2006. The company said in its press statement that it “expects continued weakness in the real estate and mortgage markets impacting the company’s title, flood certification, appraisal and mortgage origination-related data businesses.” The company said in September it would lay off 1,300 employees amid a need for cost savings and restructuring. For more information, visit http://www.firstam.com. Full disclosure: The author of this story holds put options on the First American Corporation. I’ll always disclose if I have any financial interest in a company I cover here on HW.